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Legal challenge could determine the future for lithium mining in Chile

May 9, 2018

A legal challenge over the right to mine lithium at the remote Maricunga salt flat in Chile could also prove challenging for Chilean president Sebastian Pinera’s desires to open the country to more mining investment.

At issue is a lithium deposit where state-run Codelco has mining claims as does Salar Blanco, which is 50 percent owned by Australia’s Lithium Power International.

Solar Blanco has sued Chile to block Codelco from exploiting the deposit, arguing that Codelco’s permit overlaps its property, alleging it was issued in error in a lawsuit filed with Santiago’s Appeals Court in mid-March, shortly after Pinera took office.

Reuters reported that the challenge may prove a bellwether for foreign miners anxious to invest in Chile, which is home to half of the world’s lithium reserves.

Lithium is among the world’s hottest commodities and a key ingredient in the rechargeable batteries that power everything from cell phones and tablets to electric vehicles.

In its final days in March, the former center-left government granted Codelco a permit to operate in Maricunga - a critical first step in the top copper miner’s first foray into lithium.

At the same time, the country’s nuclear commission CChen granted Salar Blanco a permit to extract approximately 473,135 t (521,533 st) of lithium carbonate over 30 years. Chile considers lithium to be a strategic resource, citing its potential use in nuclear fusion.

The case has put a Codelco search for a partner at Maricunga on hold.

Codelco said in a statement filed with the court that Salar Blanco had sued only after it had decided not to take part in the Codelco tender.

Mining Minister Baldo Prokurica told Reuters in April that he hoped for a quick resolution.

“The worst that can happen is that this case drags on and that it slows the development of lithium,” Prokurica said.

The permit to extract lithium obtained by the firm, which says it has invested around $30 million at Maricunga, was hailed as a turning point by investors put off by what some perceive as a heavy hand in the lithium industry under the previous government.

Salar Blanco had initially sought to partner with Codelco in Maricunga, but Holland said it retracted its bid after concluding Codelco’s holdings were not in a “favorable position” in the deposit.

Chile’s biggest lithium producer, SQM, will be watching the proceedings with interest.

A contract signed in January requires Codelco and SQM to consider partnering at Maricunga, bringing a long dispute between SQM and the government to an end.

But a high-level executive at Codelco told Reuters in April that any such association with SQM, which in 2017 agreed to pay more than $30 million in fines to U.S. regulators to resolve corruption cases, would be “very difficult.”